China to take 30% of Singapore bunker market, Brightoil says

China may capture almost a third of Singapore’s bunker market in three years as it expands terminals to handle more large tankers, according to Brightoil Petroleum Holdings, a Hong Kong-based marine-fuel supplier.

Sales of as much as 12 million metric tons a year of bunker fuel now traded in Singapore will shift to China after 2014, when Brightoil opens two storage terminals in the country, Raymond Sit, the company’s chairman, said in an interview in Hong Kong on July 26. Singapore sold almost 41 million tons of the fuel last year, according to the Singapore Maritime and Port Authority. China’s sales were more than 17 million tons, Brightoil said.

 

Adding terminals may challenge Singapore’s status as the world’s biggest bunkering port and cut the cost of the fuel by allowing more very large crude carriers, or VLCCs, to transport it directly to China. Some of the 2 million-barrel tankers currently divert to Singapore and transfer the commodity to smaller vessels because of insufficient Chinese capacity.

 

“Building large, high-quality bunkering facilities in China is a good choice,” John Vautrain, senior vice president at Purvin & Gertz Inc., an energy-industry consultant in Singapore, said by telephone. “If they can offer a good service and a lower cost they will certainly gain market share.”

 

WORLD’S BIGGEST

Brightoil, which currently rents storage in Singapore and China, is building the terminals along the country’s north and east coast to tap rising demand.

 

The centers, at Zhoushan in Zhejiang province and Dalian in Liaoning, will store as much as 17.5 million cubic meters of fuel, according to Brightoil. Rotterdam-based Royal Vopak NV, the world’s largest chemical and oil-storage company, has a capacity of 25.6 million cubic meters.

 

Shenzhen Brightoil Group Co., a Shenzhen-based private company wholly owned by Sit, is also building 40 new bunker barges that will start being delivered within a year, Sit said.

 

Brightoil aims to supply 20 to 30% of world bunker fuel in two to three years, he said. Total sales, about 70% of which is bunker, more than doubled to 3.9 million tons in the year ended June 30, 2010, and were 3.4 million tons in the six months ended Dec. 31. World sales of bunker are 200 million tons annually, according to Purvin & Gertz.

 

China’s imports of fuel oil, including bunker fuel and for power generation, fell 4.2% to 22.99 million tons last year, according to Chinese customs.

 

HIRING TRADERS

The company last year hired oil traders from BP Plc to get “high quality employees, especially those trained in risk control,” Sit said. It aims to have a global team of 500 to 600 traders in three years.

 

Brightoil plans to open a trading office in Geneva, Switzerland, this year, adding to bases in Singapore and Houston. The company scrapped plans for a presence in London because U.K. income tax is too high, Sit said.

 

The Geneva office will hire 80 people, including traders and risk-control staff, by the end of March 2012 and be Brightoil’s European headquarters, trading products including fuel oil, crude, natural gas and diesel. The company will expand its oil-trading team in Singapore to 250 people from 150 in two years, Sit said.

 

NATURAL GAS

The company is developing a natural-gas well with China National Petroleum Corp., the country’s largest oil producer, in the Tarim Basin in Xinjiang province. The well is scheduled to start production in the second half of this year, according to Brightoil’s 2010 annual report.

 

The company in January received a US$4 billion ($4.8 billion) credit facility from China Development Bank Corp. to expand its oil- trading and upstream exploration business. It is also considering buying and building oil storage in Europe and the U.S., Sit said, without giving details.

 

“The company has never stopped its effort to find upstream opportunities but whether it’s good timing to acquire at current high crude prices still needs more evaluation,” Sit said.